ABSTRACT
The savings and loan debacle of the 1980s, the tech bubble burst in the 1990s and the Great Recession of the 2000s all had one thing in common: the failure of the business press to warn about the disasters in time to avoid or temper them. This chapter describes the press’s failure to sense and report the danger in financial and regulatory irregularities that preceded and contributed to these three economic contractions. The Federal Reserve’s sharp hikes in interest rates in the early 1980s, aimed at counteracting inflation, triggered the S&L disaster by putting pressure on thrift institutions. The press failed to see how widespread the problems were until they were overwhelming regulators. In the next decade, rising corporate earnings and Wall Street’s exaggerated infatuation with high tech led to surges in the stock market that Fed Chairman Alan Greenspan warned was born of “irrational exuberance.” As much of the press ignored warning signals, the bubble burst and the economy swooned. Finally, in the third consecutive decade, Wall Street, abetted by the federal government, laid the groundwork for the Great Recession of 2007–2009. But the press was slow to realize how irresponsible and dangerous the surge in mortgage-backed securities proved to be until the hard times bit deeply into the nation’s economic health. Why the blind spots to all three calamities? In the runups to and during these disasters, the press relied on decision-makers inside and outside government who promoted what proved to be disastrous deviations from prudent historical norms and precedents. All of it was quite public and clear but missed by journalists.
